January Currencies

US$ - £ 1.4160

£ - € 1.2990

€ - US$ 1.0900

IR – US$ 68.13

RMB - US$ 6.5765

Over the course of last week, the US Dollar strengthened against a range of currencies – particularly those of emerging markets – although the US Dollar/Chinese renmimbi rate was essentially stable. The trend of a generally strong Dollar is expected to continue for some time yet: after a decline of 5.75% over the last year, renmimbi speculation appears to be moving to the forward market arena, with the Chinese currency quoted at 6.90 to the Dollar 12 months forward.

This represents a depreciation of a further 4.9% over today’s rate. Although China’s growth rate for the fourth quarter of 2015 slowed to 6.8%, the slowest pace for 25 years, it nevertheless triggered a 3% rally in Chinese stock markets on Tuesday, 19th January 2016 amid expectation of further stimulus measures being introduced by the government. Today, however, the Chinese stock market rally proved to be short-lived with a 2% decline in the main Shanghai index, although this was nothing when compared to the declines seen in Europe. However, what appears NOT to be fully discounted in the overall FX markets – at least yet - is the growing tension in the Middle East between Saudi Arabia and Iran. What has driven – and to a great extent still drives – the FX markets are the twin forces of China and the slumping price of oil, now well below US$ 30/barrel. Today (20th January) has seen a marked decline in Sterling against both the Dollar and Euro as a result of Mark Carney’s comments yesterday that any interest rate rises will need to be postponed in view of the uncertainties surrounding global economy.